http://mobius.blog.franklintempleton.com

Global equity markets have hit a rough patch recently, with volatility intensifying in September and October. Many investors have been concerned about issues including the prospect of rising interest rates in the United States, deflation in the eurozone, fears about the spread of the Ebola virus, ISIS in the Middle East, growth in the global economy in general, and growth in China in particular.

There have been some other country-specific issues as well. In times like these, various pundits start calling for the sky to fall, exacerbating investors’ fears. However, I would remind investors that these periods of market volatility are not new or unexpected.

It seems like a good time to examine the role of investor psychology in the markets. Evidence gathered in the field of behavioral finance suggests that many, if not most, investors often base their investment decisions on sentiment, fads and other psychological biases, and not on fundamentals. Investors, even professionals, often make flawed, irrational financial decisions.

I can’t say when this current bout of market volatility will end, but I can say, based on decades of experience navigating the markets, that it won’t last forever. And, it will likely bring potential opportunities for the savvy investor who knows where to look.